Near the end of a report that’s critical of film production incentives in place in many states is a passage that takes aim at a series TV ads by actor Jeff Daniels touting Michigan as a place for producers to bring movie production.

“State pride is commendable but it is wishful thinking that places like Lansing, Michigan will become the next Hollywood. However, that’s what a series of TV spots pushed by Governor Jennifer Granholm (and starring actor Jeff Daniels) describe as happening if the struggling state keeps its film tax incentive pro-gram,” states the report from the Tax Foundation, a taxation think tank .

There’s one problem with the passage, though: It’s not quite accurate.

The ads that Jeff Daniels does for the Michigan Economic Development Corp.’s “Upper Hand” campaign are for business development and seek to lure business investments to the state from across the economic spectrum.

The discrepancy is just one that Ken Droz, communications manager for the Michigan Film Office, cites in response to the report from the Washington, D.C.-based Tax Foundation, which claims film incentives are “costly and fail to live up to their promises.”

The report, Droz said, is simplistic and “all judgment and opinion” based on ideology, rather than an evidence-based analysis on the effectiveness of film incentives.

“It’s predetermined opinion. There’s no facts or substance that he cites,” Droz said of the report by William Luther, an adjunct scholar at the Tax Foundation.

Luther’s estimate of a $150 million pay out Michigan will make in the current fiscal year under the incentives is exaggerated as well, Droz said. In 2009, the pay out was a little more than half of that estimate, he said.

The Tax Foundation report could add fodder to the debate over the cost and benefit of the state’s film incentives, which in 2009 attracted 52 projects to Michigan and generated $233 million in expenditures.

In his report, Luther asserts that jobs created via movie production incentives are often temporary and go to workers transplanted from other states who have specialized production skills.

“Based on fanciful estimates of economic activity and tax revenue, states are investing in movie production projects with small returns and taking unnecessary risks with taxpayer dollars,” Luther writes. “It is unlikely that movie production incentives generate wealth in the long run. Most fail even in the short run. Yet they remain popular.”

Even in cases where incentives spur permanent investments in new production facilities — such as has occurred in Michigan, including the new 500,000-square-foot production studio Hangar42 Studios in the former Lear auto-parts plant in Walker that opens next week — they may “encourage entrepreneurs to act haphazardly” and overbuild, the report states.

And people who seek training to work in the industry “are only employable as long as politicians enact ever larger subsidies for the film industry.”

Droz counters that the report fails to take into consideration the state’s dire economic condition when the Legislature, by a wide margin, enacted the incentives two years ago.

“Michigan has to re-invent itself. I think everyone realizes that,” Droz said.Joe Peters, a principal with Hangar42 Studios, credits the incentives with aiding the new production studio’s development.

Owned by a group of local investors, Hangar42 Studios put $45 million into buying and renovating space in the former Lear plant. The studio expects to create 50 to 60 administrative positions and 750 to 1,000 additional jobs in its first three years of operation.

“This is a project that has been in the works for quite some time and represents a true public/private sector partnership,” Peters said. “West Michigan is an attractive option for producers with its unparalleled tax-rebate structure, diverse landscape and topography for film shoots and access to a large, skilled work force.”

Offering incentives for investments in movie and video-game projects, as well as for permanent production facilities, is just one way to help diversify the state’s economy, he said.

Given the relative infancy of the incentive program, Droz argues that it’s too early to draw hard conclusions.

“You can’t make a better judgment until you have more data and a bigger industry,” Droz said. “There is a lot of potential here.”

Michigan is one of 44 states that now offer some form of incentive for producers to bring their productions to the state. Twenty-eight use tax credits, the Tax Foundation reports.

Michigan’s incentives, enacted in 2008, include tax credits and a cash rebate. The Tax Foundation report refers to incentives in Michigan and Louisiana as “preposterously generous.”

Some state lawmakers have argued that the incentives are too generous and need changing. They have called for more transparency and stricter oversight of the program and have proposed changes such as reducing the rebate from its current maximum of 42 percent, capping the total amount rebated each year or eliminating the rebates.

The Film Office, Droz said, “has no problem” with demands for greater transparency and reporting.

Michigan also offers a 25 percent tax credit for investments in film and digital media production facilities.

Proponents say the incentives generate activity, create jobs and make Michigan more attractive to the creative class.

An economic-impact report issued in March 2009 by Michigan State University’s Center for Economic Analysis reported that, in the first eight months, the incentives helped to spur 32 film productions, generating more than $65.4 million in spending and creating more than 2,700 jobs.

Through a multiplier effect, film expenditures generated a total of $93.8 million in output last year. The study predicts total expenditures will grow 187 percent from 2008 to 2012.

Steven Miller, the director of MSU’s Center for Economic Analysis who led the 2009 study, said the state incentives “have done exactly what was anticipated and wanted” — generate activity.

Whether that early success can lead to Michigan permanently becoming a destination for productions — and whether the incentives pay for themselves in new tax collections and job creation — is a question that’s better answered when much more data is collected over a period of years, Miller said.

Three years of data “at the very minimum” is needed to began determining whether the film incentives work as intended, he said. Reaching conclusions after less than two years “is kind of pushing it. That’s not a long enough period,” Miller said.

“It’s ‘wait and see’ if this (industry) is actually going to take root in Michigan,” Miller said. “In a program like this, there’s quite a long gestation period and time for it to take root and build on itself.

Mere talk about changing the incentives could deter potential investments in permanent production facilities, Miller said.

“It’s kind of hard to invest in a new studio the state when it’s debatable whether (incentives) will be around,” Miller said.

In its 2008 annual report issued last March, the Michigan Film Office reported that the state saw 35 projects completed during the year with total expenditures of $125 million, generating refundable tax credits of $47.9 million.

The $223 million in expenditures in 2009 represent a 78 percent increase over 2008. The state’s obligation for 2009

“Not only are Michigan’s aggressive film incentives bringing in new investments to the state they are also laying the foundation for an industry that will support long-term growth,” the Michigan Film Office stated in the annual report.